Tech Company Settles SEC Charges for Material Misstatements Regarding Non-GAAP Earnings

An information technology company (the "Company") settled charges with the SEC for making material misstatements in investor disclosures regarding its non-GAAP earnings.

In the Order, the SEC determined that the Company had negligently excluded tens of millions of dollars in expenses from multiple quarterly and annual reports. According to the SEC, these expenses were excluded from the Company's non-GAAP earnings disclosures after improperly classifying them as transaction, separation, and integration-related costs. As a result, the SEC found that the Company's non-GAAP net income and diluted earnings per share disclosures were materially misleading.

The SEC found violations of several statutes and rules, including (i) Securities Act Sections 17(a)(2) and 17(a)(3) ("use of interstate commerce for purpose of fraud or deceit"), (ii) Exchange Act Section 13(a) ("Periodical and other reports"), (iii) Exchange Act Rules 12b-20 ("additional information"), 13a-1 ("Requirements of annual reports"), 13a-11 ("Current reports on Form 8-K"), 13a-13 ("Quarterly reports on Form 10-Q"), 13a-15(a) ("Controls and procedures"), and (iv) Exchange Act Rule 100(b) of Regulation G ("General rules regarding disclosure of non-GAAP financial measures") in connection with failing to properly implement, maintain and monitor non-GAAP policies and disclosures.

To settle the charges, the Company agreed (i) to a cease-and-desist order, (ii) to an $8 million civil money penalty, and (iii) to undertake the development and implementation of appropriate non-GAAP policies and disclosure controls. The SEC acknowledged the Company’s cooperation when determining the Company’s offer of settlement.